1/18 EARNINGS RELEASE 2 nd QUARTER 2014 BI&P - Banco Indusval & Partners is a commercial bank with more than 45 years of experience in the financial market, focusing on local and foreign currency, fixed income and corporate finance for companies. BI&P relies on a network of 7 branches and 2 banking service posts strategically located in economically relevant Brazilian regions, besides an offshore branch in Cayman Islands, its brokerage house Guide Investimentos operating at the São Paulo Stock, Commodities and Futures Exchange - BM&FBOVESPA and Serglobal Cereais, acquired in April 2011, which originates agricultural bonds. Highlights Expanded Credit Portfolio totaled R$3.9 billion, remaining stable in the quarter but up 21.4% from June 2013. Loans rated between AA and B corresponded to 91% of the expanded credit portfolio (85% in June 2013). Reflecting the quality of the loan portfolio, 99% of the loans granted in the quarter were rated between AA and B. The Corporate and Emerging Companies segments accounted for 59% and 40%, respectively, of the expanded credit portfolio, as against 51% and 48% in 2Q13. The Managerial Expense with Allowance for Loan Losses (annualized) in 2Q14 corresponded to 0.66% of the expanded credit portfolio (1.1% in 1Q14), which is a highly positive outcome of the conservative credit policy being adopted by the bank in recent years. Funding totaled R$4.1 billion, up 5.2% in the quarter and 31.6% in twelve months, while Free Cash totaled R$748.2 million at the end of 2Q14, reflecting the high liquidity enjoyed by the bank. Income from services rendered and tariffs (see page 4) totaled R$15.7 million in 2Q14 and R$26.8 million in 1H14, representing growth of 42.3% in the quarter and 117.2% in relation to 1H13. The investment banking area already accounts for 50% of this revenue in 2Q14 (26% in 1Q14) which is the result of investments in the area in 2013 for acquiring the advisory firm VOGA and hiring a few top-notch professionals in this field. Guide Investimentos, responsible for our wealth management and brokerage operations, entered into important alliances during 2014, with (i) Omar Camargo Corretora de Câmbio e Valores Mobiliários Ltda, (ii) Geraldo Corrêa Corretora de Câmbio e Valores Mobiliários Ltda, and (iii) Bullmark Consultoria Financeira Ltda. With these alliances, Guide has strengthened its distribution network and is now present in important regions across the country. After the migration of all the clients of these partners, Guide will manage assets of around R$2 billion. The quarterly Result of R$1.1 million already reflects a significant improvement from previous quarters, but still impacted by (i) the non-cash accounting effects of the discontinuation of the designation of hedge accounting of cash flows from a series of funding operations indexed to inflation indices (IPCA and IGPM), which are still protected by hedge operations; (ii) the negative contribution from Guide Investimentos as result of all the investments made in recent quarters; (iii) the still increasing investment banking, structured operations and sales desks which, despite the significant growth from the same period the previous year, still have tremendous potential for growth; and (iv) the need for economies of scale, considering our appetite for risk and its direct impact on loan spreads. IDVL4: R$3.36 per share Closing: June 12, 2014 Outstanding Shares: 88.991.729 Market Cap: R$299.0 million Price/Book Value: 0.45 Conference Call / Webcasts June 13, 2014 In English 11 a.m. (US EST) / 12 a.m. (Brasília) Connections Brazil: +55 11 3193-1001 +55 11 2820-4001 EUA: +1 786 924-6977 Code: Banco BI&P In Portuguese 10 a.m. (US EST) / 11 a.m. (Brasília) Number: +55 11 3193-1001 +55 11 2820-4001 Code: Banco BI&P Website www.bip.b.br/ir Expanded credit portfolio totaled R$3.9 billion, remaining stable in the quarter but up 21.4% in twelve months Income from services rendered and tariffs totaled R$15.7 million, up 42% in the quarter and 117% from 1H13 Managerial ALL Expense was to 0.66%, as against 1.10% in 1Q13, underscoring the quality of the loan portfolio
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
1/18
EARNINGS RELEASE
2nd QUARTER 2014
BI&P - Banco Indusval & Partners is a commercial bank with more than 45 years of experience in the financial market, focusing on local and foreign currency, fixed
income and corporate finance for companies. BI&P relies on a network of 7 branches and 2 banking service posts strategically located in economically relevant Brazilian
regions, besides an offshore branch in Cayman Islands, its brokerage house Guide Investimentos operating at the São Paulo Stock, Commodities and Futures Exchange -
BM&FBOVESPA and Serglobal Cereais, acquired in April 2011, which originates agricultural bonds.
Highlights
Expanded Credit Portfolio totaled R$3.9 billion, remaining stable in the
quarter but up 21.4% from June 2013.
Loans rated between AA and B corresponded to 91% of the expanded credit
portfolio (85% in June 2013). Reflecting the quality of the loan portfolio, 99%
of the loans granted in the quarter were rated between AA and B.
The Corporate and Emerging Companies segments accounted for 59% and
40%, respectively, of the expanded credit portfolio, as against 51% and 48%
in 2Q13.
The Managerial Expense with Allowance for Loan Losses (annualized) in 2Q14
corresponded to 0.66% of the expanded credit portfolio (1.1% in 1Q14), which
is a highly positive outcome of the conservative credit policy being adopted by
the bank in recent years.
Funding totaled R$4.1 billion, up 5.2% in the quarter and 31.6% in twelve
months, while Free Cash totaled R$748.2 million at the end of 2Q14,
reflecting the high liquidity enjoyed by the bank.
Income from services rendered and tariffs (see page 4) totaled R$15.7 million
in 2Q14 and R$26.8 million in 1H14, representing growth of 42.3% in the
quarter and 117.2% in relation to 1H13. The investment banking area already
accounts for 50% of this revenue in 2Q14 (26% in 1Q14) which is the result of
investments in the area in 2013 for acquiring the advisory firm VOGA and
hiring a few top-notch professionals in this field.
Guide Investimentos, responsible for our wealth management and brokerage
operations, entered into important alliances during 2014, with (i) Omar
Camargo Corretora de Câmbio e Valores Mobiliários Ltda, (ii) Geraldo Corrêa
Corretora de Câmbio e Valores Mobiliários Ltda, and (iii) Bullmark Consultoria
Financeira Ltda. With these alliances, Guide has strengthened its distribution
network and is now present in important regions across the country. After the
migration of all the clients of these partners, Guide will manage assets of
around R$2 billion.
The quarterly Result of R$1.1 million already reflects a significant
improvement from previous quarters, but still impacted by (i) the non-cash
accounting effects of the discontinuation of the designation of hedge
accounting of cash flows from a series of funding operations indexed to
inflation indices (IPCA and IGPM), which are still protected by hedge
operations; (ii) the negative contribution from Guide Investimentos as result of
all the investments made in recent quarters; (iii) the still increasing
investment banking, structured operations and sales desks which, despite the
significant growth from the same period the previous year, still have
tremendous potential for growth; and (iv) the need for economies of scale,
considering our appetite for risk and its direct impact on loan spreads.
IDVL4: R$3.36 per share
Closing: June 12, 2014
Outstanding Shares: 88.991.729
Market Cap: R$299.0 million
Price/Book Value: 0.45
Conference Call / Webcasts
June 13, 2014
In English
11 a.m. (US EST) / 12 a.m. (Brasília)
Connections
Brazil: +55 11 3193-1001
+55 11 2820-4001
EUA: +1 786 924-6977
Code: Banco BI&P
In Portuguese
10 a.m. (US EST) / 11 a.m. (Brasília)
Number: +55 11 3193-1001
+55 11 2820-4001
Code: Banco BI&P
Website
www.bip.b.br/ir
Expanded credit portfolio totaled R$3.9 billion, remaining stable in the quarter but up 21.4% in twelve months
Income from services rendered and tariffs totaled R$15.7 million, up 42% in the quarter and 117% from 1H13
Managerial ALL Expense was to 0.66%, as against 1.10% in 1Q13, underscoring the quality of the loan portfolio
Message from the Management ............................................................................................................................................ 3
Capital Adequacy .................................................................................................................................................................. 13
Capital Markets .................................................................................................................................................................... 14
Income Statement ................................................................................................................................................................ 18
3/18 3/18
EARNINGS RELEASE
2nd Quarter 2014
Message from the Management
In 2Q14, we continued our strategy of growing recurring fees and tariffs, and of prioritizing our Corporate segment
portfolio, while maintaining a cautious approach to lending, given the still uncertain and highly volatile macroeconomic
scenario.
The expanded credit portfolio ended the quarter at R$3.9 billion, stable in relation to March 2014, but growing 21.4%
in relation to June 2013, with the focus still on better quality loans - 99% of the loans granted during the quarter were
rated between AA and B. The Corporate segment accounted for 59% (51% in 2Q13) of the expanded credit portfolio,
while the Emerging Companies segment accounted for 40% (48% in 2Q13). The stability of the expanded credit
portfolio was due to three factors: (i) conservative approach to lending; (ii) slowdown in economic activity on account of
the World Cup; and (iii) a delay in the plantation of soy and corn crops, considering our specialization in the agricultural
segment. We expect to speed up the growth pace in the second half of the year, though maintaining the conservative
approach with regard to credit quality. Note that during the quarter, loan settlements totaled R$1,321 million and,
despite the above-mentioned factors, loans originated by our sales team - now fully structured and aligned with the
current strategy of the bank - totaled R$1,424 million, with fresh loans amounting to R$818 million and loan renewals
amounting to R$606 million.
Loans overdue more than 60 days (NPL 60) decreased from 2.6% at the end of 1Q14 to 2.0% in 2Q14, and NPL 60
loans in what we call the “new portfolio”, that is, loans granted after March 2011 under the new credit policy adopted
in this new phase of the bank, stood at 1.2%. The managerial expense with allowance for loan losses in 2Q14
(annualized) corresponded to 0.66% of the expanded credit portfolio and in the case of the new portfolio, to 0.43%,
which proves the quality of our loan portfolio. These percentages reflect the good work done by the bank’s credit and
sales teams in recent quarters in both client prospecting and credit analysis.
As for funding, total deposits, which include agro notes (LCA), real estate notes (LCI) and bank notes (LF) grew 9.2% in
the quarter and 48.8% in relation to June 2013. We continue to diversify our funding mix, especially through: (i) the
issue of LCAs, which increased 19.7% in the quarter and 135.9% in twelve months, and (ii) the dispersal of the
depositor base through partnerships with more than 40 brokerage firms and distributors. As a result, we reduced
funding costs, which reached the lowest ever in 2Q14, and expanded the depositor base, which totaled more than
7,000 at the end of June 2014, an increase of 5,400 in twelve months. Compared to the period when it rolled out the
restructuring strategy in April 2011, BI&P today has more stable, dispersed and cheaper funding sources.
Financial intermediation result before managerial expense with allowance for loan losses totaled R$43.3 million,
48.7% higher than in 1Q14 and 74.9% higher than in 2Q13. Net interest margin with clients increased from 4.1% in
2Q13 and 3.9% in 1Q14 to 4.4% in 2Q14, since we could negotiate better rates for clients, funding costs decreased
and revenue from derivatives increased.
Income from services rendered and tariffs totaled R$15.7 million in 2Q14, increasing 42.3% in the quarter and 120.8%
in relation to 2Q13. The investment banking area started delivering more consistent results in 2Q14, having concluded
M&A operations involving amounts more than R$2 billion, which is the result of investments in the area in 2013 for
acquiring the advisory firm VOGA and hiring a few top-notch professionals in this field. A sizeable portion of these fees
came from clients from the bank’s sales area, which shows greater potential for cross selling fixed income and M&A
products. In May 2014, BI&P obtained authorization from the Central Bank of Brazil to operate as a multiple service
bank and approval for its investment portfolio. Consequent to this approval, Banco BI&P started operating with the (i)
commercial, (ii) foreign exchange, and (iii) investment portfolios.
During the whole of 2014, we exercised strict control over both personnel and administrative expenses. Despite the
absorption of Banco Intercap, employee headcount decreased 11% from 2Q13, with personnel expenses declining
7.1% in the quarter and 0.8% in relation to 2Q13, resulting from the policy of constant pursuit of efficiency and
investments made by our IT area. In 2Q14 alone, the reduction in staff was 8% and its effects on personnel expenses
will be observed from the second half of this year. Administrative expenses decreased 7.5% in the quarter, due to the
strict control over expenses in 2014, yet increased 7.1% from 2Q13, mainly impacted by the inflation during the period
and investments to improve our technological infrastructure. In the case of Guide Investimentos, there was an increase
in both the headcount and in personnel and administrative expenses, due to the investments made in recent quarters
and its current phase of structuring and growth.
Guide Investimentos, which has already consolidated its position as an important distributor of our funding products,
entered into important alliances this year: in February with Omar Camargo Corretora de Valores, the biggest and oldest
firm in the sector in the state of Paraná, and in July with Geraldo Corrêa Corretora de Valores, a long-time stockbroker
4/18 4/18
EARNINGS RELEASE
2nd Quarter 2014
in the state of Minas Gerais, and Bullmark, a financial consulting firm focused on wealth management for high net
worth individuals. With the help of these alliances, Guide is continuing its strategy of expanding its client’s base and
geographic presence. After the migration of all the clients of these partners, Guide will manage assets of around R$2
billion.
The quarterly Result of R$1.1 million already reflects a significant improvement from previous quarters, but still
impacted by (i) the non-cash accounting effects of the discontinuation of the designation of hedge accounting of cash
flows from a series of funding operations indexed to inflation indices (IPCA and IGPM), which are still protected by
hedge operations; (ii) the negative contribution from Guide Investimentos as result of all the investments made in
recent quarters; (iii) the still increasing investment banking, structured operations and sales desks which, despite the
significant growth from the same period the previous year, still have tremendous potential for growth; and (iv) the need
for economies of scale, considering our appetite for risk and its direct impact on loan spreads.
We remain focused on executing the strategy, always with a keen eye on market challenges and opportunities. Note
that we seek growth and adequate profitability in a conscious manner without jeopardizing future results and business
sustainability.
5/18 5/18
EARNINGS RELEASE
2nd Quarter 2014
Macroeconomic Scenario
Economic activity continued to slow down in the second quarter. In the first quarter of 2014, Gross Domestic Product
(GDP) grew just 0.2% in relation to the fourth quarter of 2013, pulled down by sluggish industrial activity and the
downturn in retail sales during the period. The macroeconomic scenario did not change between April and June, which
led to consumer and business confidence plummeting to the lowest level since the onset of the financial crisis. In this
scenario of a slowdown in a few sectors and the decline in the willingness to invest, the probability of registering
negative GDP growth in the second quarter is high. As a result, analysts have constantly been reducing their forecasts
of economic growth for 2014. According to the Focus report, economists are already expecting a GDP growth of below
1% this year.
Added to this is the market uncertainty about the way public accounts are being handled. The continued tax rebate
policies and sluggish economic activity have adversely affected federal tax collections. However, government spending
has not kept pace with the economic slowdown, such that in the absence of considerable extra revenues, it will be
increasingly difficult for the government to achieve the primary surplus target for this year of 1.9%.
Despite the more modest economic activity, accumulated inflation in twelve months remains high. In June, the
Extended Consumer Price Index (IPCA) went past the inflation target ceiling to reach 6.52%. The supply shock of
agricultural products, caused by lack of rainfall at the start of the year and the increase in prices of services, which
were pressured by the World Cup, among other factors, were the main reasons behind this increase in prices in the first
half of the year.
Though the Central Bank of Brazil expects inflation to hover well above the center of the target for the coming months,
its concerns about economic activity led it to signal that, after seven successive hikes, it should maintain the interest
rate at the current level of 11% p.a.
The job market seems to have shown the initial signs of losing steam, with the pace of formal job openings slowing
down in recent months. A negative highlight in the period was the decline in industrial jobs.
In Brazil’s national financial system, loan operations grew 11.8% in the second quarter of 2014 to reach R$2.830
trillion. Average term of loans increased from 93.6 months in June 2013 to 101.1 months in June 2014. Credit as a
percentage of GDP ended the second quarter at 56.3%, slightly higher than 56.0% in the first quarter.
In the case of free credit operations, individual defaults dropped from 7.2% in the second quarter of 2013 to 6.5% this
quarter, while corporate defaults declined from 3.5% to 3.4%. These marginal improvements in default rates, despite a
less favorable economic scenario, are the result of the more selective approach to lending adopted by Brazilian banks.
Macroeconomic Data 2Q14 1Q14 2Q13 2013 2014(e)
Real GBP Growth (Q/Previous Q) -0.10% 0.20% 1,6% 2.3% 1.00%
1 Excluding the effects of (i) recoveries of loans written off, and (ii) discounts granted upon settlement of loans in the period.
2 Excludes the effect of discontinuance of the designation of hedge accounting in 2Q12. This effect is included in Non-Recurring Operating Expenses.
3 Includes expenses related to financial intermediation, such as (i) expenses related to the joint venture C&BI, (ii) commission paid to the distributors
of our funding products, especially LCAs and LCIs, which are classified under administrative expenses. Excludes the accounting heading Result of
Sale/Transfer of Financial Assets resulting from the shareholders’ agreement at the time of acquisition of Banco Intercap. This account is
considered while calculating the managerial expense with allowance for loan losses.
4 Managerial expense with allowance for loan losses is calculated by adding to the expense with allowance for loan losses, the effects of (i) the
recovery of loans written off and (ii) discounts granted upon settlement of loans in the period. Also excludes the impacts of the shareholders’
agreement at the time of acquisition of Banco Intercap in the Income Statement: (i) from the accounting heading Result of Sale/Transfer of
Financial Assets; and (ii) from other operating expenses and income.
5 Includes expenses booked under administrative expenses related to income from services rendered.
6 Excludes (i) non-recurring operating expenses, (ii) expenses related to financial intermediation, and (iii) expenses related to income from services
rendered.
7 Result of the sum of (i) Other operating income and expenses, (ii) taxes and (iii) Result from affiliated companies. Excludes other operating income
and expenses resulting from the shareholders’ agreement at the time of acquisition of Banco Intercap.
n.c. = not comparable (percentage above 300% or below -300%, or number divided by zero).
7/18 7/18
EARNINGS RELEASE
2nd Quarter 2014
Operating Performance
The financial and operating information presented in this report are based on consolidated financials prepared in
millions of Real (local currency), according to Brazilian Central Bank rules, except were otherwise stated.
Efficiency Ratio BI&P group w/o Guide Investimentos 72.6% 100.5% -27.9 p.p. 147.2% -74.6 p.p. 84.7% 114.7% -30.0 p.p.
Other Information 2Q14 1Q14 2Q14/1Q14 2Q13 2Q14/2Q13
Number of Corporate Clients 1,209 1,128 7.2% 874 38.3%
Number of Employees 441 453 -2.6% 448 -1.6%
Banco BI&P employees 347 379 -8.4% 390 -11.0%
Guide Invstimentos and Serglobal employees 94 74 27.0% 58 62.1%
1 Including Guarantees issued, Private Credit Bonds (PNs and Debentures) and Agro Securities (CDA/WA and CPR). 2 Excluding Agro Securities (CPRs and CDA/WA) and Private Credit Bonds (PNs and debentures) for trading.
n.c. = not comparable (percentage above 300% or below -300%, or number divided by zero).
8/18 8/18
EARNINGS RELEASE
2nd Quarter 2014
Operating Performance
Financial intermediation result before managerial expense with allowance for loan losses totaled R$43.3 million,
48.7% higher than in 1Q14 and 74.9% higher than in 2Q13, mainly impacted by the increase in the net interest margin
with clients, which was 4.4% in 2Q14, since we could negotiate better rates for clients, funding costs decreased and
revenue from derivatives increased. The managerial expense with allowance for loan losses (annualized) in 2Q14,
corresponded to 0.66% of the expanded credit portfolio, and to 0.43% of the loans we call the “new portfolio”, that is,
loans granted after March 2011.
The quarterly result was R$1.1 million, still impacted: (i) by the non-cash accounting effects of the discontinuation of
the designation of hedge accounting of the cash flows from a series of funding operations indexed to inflation indices
(IPCA and IGPM), which are still protected by hedge operation; (ii) the negative contribution from Guide Investimentos
as result of all the investments made in recent quarters; (iii) the still increasing investment banking and structured
operations which, despite the significant growth from the same period the previous year, still have tremendous
potential for growth; and (iv) the need for economies of scale, considering our appetite for risk and its direct impact on
1 Starting from March 2014, export credit notes (NCE) and export notes (CCE) originated by Banco Intercap are included in Loans & Financing in
BRL, as well as NCE and CCE originated by Banco BI&P are classified. 2 The Other segment basically consists of Consumer Credit operations for Used Vehicles and financing of non-operating assets.
The Corporate segment (companies with annual revenues of between R$400 million and R$2 billion) accounted for
59% of the expanded credit portfolio while the Emerging Companies segment (companies with annual revenues of
between R$80 million and R$400 million) accounted for 40%. Note that the share of the Corporate segment of total
loans increased during the quarter due to the more conservative lending approach adopted by the bank.
Expanded Credit Portfolio
by Segment
Expanded Credit Portfolio by
Client Concentration
* The Other segment basically consists of Consumer Credit operations for Used Vehicles and financing of non-operating assets.
** Including R$97,2 million of loans assigned to Banco Intercap.
In 2Q14, the agro bonds portfolio totaled R$884.2 million, up 18.4% in the quarter and 85.0% in twelve months. The
growth in twelve months is the result of joint ventures and partnerships.